D E C I S I O N

CHICO-NAZARIO,
J.:

The Case

This is a petition for review on certiorari under
Rule 45 of the Rules of Court seeking the reversal of the Decision[1] dated 24 November 2000, and
the Resolution[2]
dated 26 January 2001, rendered by the Court of Appeals in CA-G.R. SP No.
46025, which annulled and set aside the decision[3]
dated 14 May 1997, and resolution[4]
dated 12 August 1997, of the Department of Agrarian Reform Adjudication Board
(DARAB) in DARAB Case No. 0776. In its decision, the DARAB affirmed the ruling[5] dated 03 April 1992 of the
DARAB Regional Adjudication Office[6]
(Regional Office) in favor of petitioners LUDO & LUYM Development
Corporation (LUDO) and CPC Development Corporation (CPC) in Reg. Case No.
12-39-000-52-91.

The Facts

The present petition stemmed from a complaint[7] for “Opposition Against the
Application for Renewal of the Conversion Order/Claim for Payment of
Disturbance Compensation Plus Damages” filed on 30 April 1991 by Vicente C.
Barreto against herein petitioners LUDO and CPC before the DARAB Regional
Office in IliganCity, Lanao del Norte.

The landholding subject of the case at bar involves
a thirty-six-hectare land, six hectares of which were devoted for the planting
of coconuts, while the remaining thirty hectares had been planted with sugarcane. The land
is covered by Transfer Certificate of
Title No. 18822-25.

The facts are
beyond dispute.

In 1938, Vicente C. Barreto, as tenant of landowner Antonio Bartolome,
worked on and cultivated two hectares of land devoted to sugarcane plantation.

In 1956, Antonio Bartolome sold the entire estate to LUDO with the
latter absorbing all the farmworkers of the former. Vicente C. Barreto was designated as a co-overseer with Bartolome on the
six-hectare coco land portion of the estate, pending the development of the
entire estate into a residential-commercial complex. It was agreed that the new
owner, herein petitioner LUDO, Antonio Bartolome and complainant Vicente C.
Barreto will share in the harvests.

In 1972, when
sugarcane production became unprofitable, herein petitioner LUDO discontinued
the planting of the same and shifted to cassava production. Soil analysis
revealed later, however, that the land was not suitable for cassava production
and so the same was also discontinued.

In 1975, City
Ordinance No. 1313, otherwise known as the Zoning Regulation of Iligan City,
was passed. Pursuant thereto, the subject landholding fell within the
Commercial-Residential Zone of the city.

Sometime in
1978, having decided to convert the entire estate into a residential-commercial
complex, herein petitioner LUDO instructed Antonio Bartolome, who, in turn,
instructed complainant Vicente C. Barreto, to submit a list of its legitimate
farmworkers so that they may be given some sort of disturbance compensation. Accordingly,
such list was submitted. Some farmworkers accepted “disturbance” compensation,
while the others who refused to accept the same instituted Court of Agrarian
Reform (CAR) Cases No. 48[8]
and No. 59.[9]
In the latter case, Vicente C. Barreto was impleaded as a party defendant in
his capacity as a co-overseer of the entire estate. Ultimately, said cases were
settled by compromise agreements.

On 30 March 1978, the Department
of Agrarian Reform (DAR) issued a conversion permit[10] to herein petitioner LUDO
authorizing the conversion of the entire estate into a residential/commercial
lot.

Ten years later,
or on 24 November 1988, herein co-petitioner CPC, the developer of the subject
property, wrote the Secretary of the DAR to ask for the renewal of the
conversion permit earlier issued to the owner, herein petitioner LUDO, as
required by the Housing and Land Use Regulatory Board, in relation to the
revised subdivision plan of herein co-petitioner developer CPC for the subject
property. Vicente C. Barreto fervently opposed the above move by filing on 30 April 1991 a
letter-complaint before the DARAB Regional Office in IliganCity, Lanao del
Norte, on the ground that such act was one of the prohibited acts enjoined by
Section 73 of Republic Act No. 6657.[11]

SEC. 73. Prohibited Acts and
Omissions. - The following are prohibited:

(a)The ownership
or possession, for the purpose of circumventing the provisions of this Act, of
agricultural lands in excess of the total retention limits or award ceilings
by any person, natural or juridical, except those under collective ownership by
farmer-beneficiaries.

(b)The forcible
entry or illegal detainer by persons who are not qualified beneficiaries under
this Act to avail themselves of the rights and benefits of the Agrarian Reform
Program.

(c)The
conversion by any landowner of his agricultural land into any non-agricultural
use with intent to avoid the application of this Act to his landholdings and to
dispossess his tenant farmers of the land tilled by them.

(d)The willful
prevention or obstruction by any person, association or entity of the
implementation of the CARP.

(e)The sale,
transfer, conveyance or change of the nature of lands outside of urban centers
and city limits either in whole or in part after the effectivity of this Act.
The date of the registration of the deed of conveyance in the Register of Deeds
with respect to titled lands and the date of the issuance of the tax
declaration to the transferee of the property with respect to unregistered lands,
as the case may be, shall be conclusive for the purpose of this Act.

(f)The sale,
transfer or conveyance by a beneficiary of the right to use or any other
usufructuary right over the land he acquired by virtue of being a beneficiary,
in order to circumvent the provisions of this Act. [Emphasis supplied.]

In a letter[12] dated 29 July 1991, CPC
formally informed Vicente C. Barreto of the termination of his employment as a
co-overseer of the subject landholding due to the fact that the management has
“already commenced selling our subdivision lots and therefore, we have to start
cutting coconut trees and other plants, especially within the subdivision
area….”

After hearing the parties, the DARAB Regional Office
(Region XII) in IliganCity, Lanao del Norte, rendered a decision, dated 03 April 1992, in
favor of respondents, herein petitioners, LUDO and CPC. The fallo of the
said decision reads:

WHEREFORE, premises considered,
judgment is hereby rendered in favor of the respondents and against the
complainant. Complainant’s opposition against the application for renewal of
the conversion order, his claims for payment of disturbance compensation and
damages are hereby DISMISSED for lack of merit. Complainant’s relocation or
payment of disturbance compensation is addressed to the humanitarian
disposition of the respondents, as the complainant has no legal right of
possession much less ownership over the premises he is residing. NO COSTS.[13]

In arriving at its decision, the DARAB Regional
Office found that there was no tenancy relationship existing between respondent
LUDO and complainant Vicente C. Barreto, thus, no disturbance compensation was
due the latter for having been dispossessed of the six-hectare landholding he
had been tilling. The DARAB Regional Office gave ample credence to the
affidavit of Antonio Bartolome, complainant’s co-overseer and former owner of
the thirty-six-hectare landholding. In said affidavit, Bartolome stated that
“the complainant was one of his farmworkers who was then cultivating a
two-hectare portion of his land which was devoted to sugarcane production at
the time of sale in 1956. Thereafter, they were jointly designated as overseers
of the entire LUDODEV estate and subsequently on the six-hectare portion of the
estate which was planted with coconuts.”

Likewise, it stated that even granting for the sake
of argument that complainant Vicente C. Barreto was indeed a tenant of the
landholding, when he did not join as party plaintiff in either of the CAR cases
aforementioned, and instead opted to be designated as a co-overseer with
Antonio Bartolome, he waived the alleged tenant status, “[h]aving thus waived
his tenancy in favor of overseeing, complainant is precluded by estoppel and
laches to claim only at this time for disturbance compensation. He simply
cannot be allowed to enjoy the benefits flowing from both worlds…”

Furthermore, the DARAB Regional Office also made the
pronouncement that as early as 1975, the subject landholding ceased to be
agricultural in nature when Conrado F. Estrella, Secretary of the DAR, issued a
conversion permit[14]
allowing said conversion from agricultural to residential/commercial pursuant
to the zoning regulation passed by the legislative authority of IliganCity. The
land having ceased to be agricultural in nature as far back as 1975, there was
no current legitimate tenant to speak of.

With
respect to the claim of complainant Vicente C. Barreto for payment of
disturbance compensation, the DARAB Regional Office declared that in view of
the preceding paragraph, such had already prescribed by virtue of Section 38 of
Rep. Act No. 3844:[15]

SEC. 38. Statute of
Limitations. – An action to enforce any cause of action under this Code
shall be barred if not commenced within three years after such cause of action
accrued.

It explained that the statute of limitation should
commence to run from the time of notice to complainant of the intended
conversion by the landowner, specifically, sometime in 1974 when petitioner
LUDO instructed Antonio Bartolome and complainant Vicente C. Barreto to submit
a list of its legitimate farmworkers entitled to disturbance compensation.
Thus, by 1978, complainant Vicente C. Barreto’s cause of action had already
prescribed.

On 14 May
1997, the DARAB promulgated a decision
dismissing the appeal and affirming the assailed decision of the Provincial
Adjudicator of the DARAB Regional Office as follows:

WHEREFORE, finding no reversible error in
the Decision of the Board a quo, the appeal is hereby DISMISSED for lack
of merit.[16]

Complainants-appellants
heirs of Vicente C. Barreto then filed a motion for reconsideration. In a
Resolution dated 12 August 1997, the Board, finding that no new matters
had been adduced by the movant, denied the motion.

Undaunted, they
subsequently filed a petition for review on certiorari before the Court
of Appeals. The appellate court ruled in favor of petitioners-appellants heirs
of Vicente C. Barreto and annulled and set aside the DARAB’s decision, stating
thus:

WHEREFORE, the petition for
review is granted. The assailed Decision promulgated on May 14, 1997 and Resolution dated August 12, 1997 are hereby ANNULLED and SET
ASIDE.

Let the records of this case be
remanded to the Department of Agrarian Reform Adjudication Board for the
computation of disturbance compensation in accordance to law.[17]

Respondents-appellees
LUDO and CPC filed a motion for reconsideration but said motion was similarly
denied for lack of merit by the Court of Appeals in a resolution dated 02 April 2003.

Hence, this
petition.

The Issue

Petitioners LUDO
and CPC filed the present petition for review on certiorari under Rule
45 of the Rules of Court praying for the reversal of the above Decision and
Resolution of the Court of Appeals premised on an ostensibly simple issue
of whether or not there existed a tenancy relationship between petitioner LUDO
and Vicente C. Barreto. A reply in the affirmative would necessarily entail the
grant of disturbance compensation to respondent heirs of Barreto.

The Court’s Ruling

The petition is
bereft of merit.

A priori, the question of
whether a person is a tenant or not is basically a question of fact and the
findings of the Court of Appeals and the Boards a quo are, generally,
entitled to respect and non-disturbance. However, this Court finds that there
is a compelling reason for it to apply the exception of non-conclusiveness of
their factual findings on the ground that the findings of facts of both courts
contradict each other. An overwhelming evidence in favor of the late Vicente C.
Barreto was overlooked and disregarded. Hence, a perusal of the records and
documents is in order.

The issue of whether or not
there exists a tenancy relationship between parties is best answered by law,
specifically, The Agricultural Tenancy Act of the Philippines[18] which defines “agricultural
tenancy” as:

. .
. [T]he physical possession by a person of land devoted to agriculture
belonging to, or legally possessed by, another for the purpose of production
through the labor of the former and of the members of his immediate farm
household, in consideration of which the former agrees to share the harvest
with the latter, or to pay a price certain, either in produce or in money, or
in both.[19]

From the foregoing
definition, the essential requisites[20]
of tenancy relationship are:

1.the parties are the landholder and the tenant;

2.the subject is agricultural land;

3.there is consent;

4.the purpose is agricultural production; and

5.there is consideration.

All of the above requisites
are indispensable in order to create or establish tenancy relationship between
the parties. Inexorably, the absence of at least one requisite does not make
the alleged tenant a de facto one for the simple reason that unless an
individual has established one’s status as a de jure tenant, he is not
entitled to security of tenure guaranteed by agricultural tenancy laws.
Conversely, one cannot be ejected from the agricultural landholding on grounds
not provided by law. This is unequivocally stated in Section 7 of Rep. Act No.
3844, which provides:

SEC.
7. Tenure of Agricultural Leasehold Relation. – The agricultural leasehold
relation once established shall confer upon the agricultural lessee the right
to continue working on the landholding until such leasehold relation is
extinguished. The agricultural lessee shall be entitled to security of tenure
on his landholding and cannot be ejected therefrom unless authorized by the
Court for causes herein provided.

Fundamentally,
the Boards a quo found that the first essential element – is that the
parties are the landowner and tenant – is very much absent in the case at bar.
In reversing the DARAB’s decision, however, the Court of Appeals noted that the
DARAB overly relied on the fact that deceased Vicente C. Barreto did not join
as party plaintiff the other tenants of petitioner LUDO in CAR Cases No. 48 and
No. 59 and instead was impleaded as party defendant in CAR Case No. 59 along
with petitioner LUDO. It held that:

The fact that Barreto did not
institute a case or did not join the other tenants in CAR Case Nos. 48 and 59
does not imply that he was not a tenant. He precisely filed his opposition
before the Board to protect his rights as tenant on the subject six (6) hectare
coconut land. His action or rather inaction in the past does not bar him of the
petitioners from seeking whatever relief they may be entitled to under the law.[21]

In their memorandum
submitted to the Court, petitioners LUDO and CPC, while admitting that Vicente
Barreto was a former worker-cultivator/tenant of the subject parcel of land,
insist that he was such only during the time when the landholding was still
owned by Antonio Bartolome. Thus, they basically deny now the existence of a
landlord-tenant relationship between the parties of the instant case. It had
the same view as the Boards a quo, that the first essential element
indicating the existence of a landlord-tenant relationship, “that the parties
are the landowner and the tenant or agricultural lessee,”[22] is essentially lacking.
They adamantly maintain that after its sale to petitioner corporation, however,
Vicente Barreto opted to waive his right to claim disturbance compensation to
become an overseer of the said parcel of land, together with its former
owner, Antonio Bartolome. There being no landlord-tenant relationship between
Vicente Barreto and petitioner corporation, it asserts that, consequently,
respondent legal heirs of Vicente C. Barreto are not entitled to disturbance
compensation.

We disagree.

Even as we
uphold time and again the existence and validity of implied agricultural
tenancy agreements, the inverse does not essentially follow. The intention of a
tenant to surrender the landholding and concomitantly the statutory rights
emanating from the status of being a tenant, absent a positive act, cannot, and
should not, be presumed, much less determined by implication alone. Otherwise,
the right of a tenant to security of tenure becomes an illusory one. Tenancy
relations cannot be bargained away except for the strong reasons provided by
law[23]
which must be convincingly shown by evidence.

In the case at
bar, it bears emphasizing that no one has denied the existence of the tenancy
status of deceased Vicente C. Barreto over the subject thirty-six-hectare
landholding with respect to its former owner, Antonio Bartolome. There being no
waiver executed by deceased tenant Barreto, no less than the law clarifies that
the existence of an agricultural tenancy relationship is not terminated by mere
changes of ownership, in cases of sale or transfer of legal possession as in
lease.[24]
Section 10 of Rep. Act No. 3844 provides that:

SEC. 10. Agricultural
Leasehold Relation Not Extinguished by Expiration of Period, etc. – The
agricultural leasehold relation under this Code shall not be extinguished … by
the sale, … of the landholding. In case the agricultural lessor sells, … the
purchaser … shall be subrogated to the rights and substituted to the
obligations of the agricultural lessor.

For this reason,
when petitioner LUDO became the owner of the subject landholding, it became
subrogated to the rights and obligations of its predecessor-in-interest,
Antonio Bartolome, his obligation under the law to the deceased tenant, Vicente
C. Barreto, continues and subsists until terminated as provided for by law.

Apropos the
matter of deceased respondent Vicente C. Barreto’s designation as an overseer,
it was held by the Boards a quothat the nature of an overseer goes
against the character of a tenant. In contrast, the Court of Appeals’
estimation is that:

. . . [R]espondent’s purpose in
designating Barreto’s (sic) as overseer was to bring about the production of
coconut. His designation would prove inutile without him performing tasks
necessary to take care, supervise and manage the subject landholding. Logically,
in the process of taking care, supervising and managing the six-hectare coco
land he cultivated the same.[25]

A tenant has
been defined under Section 5(a) of Rep. Act No. 1199 as a person who, himself,
and with the aid available from within his immediate household, cultivates the
land belonging to or possessed by another, with the latter’s consent for
purposes of production, sharing the produce with the landholder under the share
tenancy system, or paying to the landholder a price certain or ascertainable in
produce or in money or both, under the leasehold system. Applying the preceding
to the case at bar, what became apparent from the records is that though the
late Vicente C. Barreto was designated as a co-overseer of the subject
landholding, he was also tilling the land and had a sharing arrangement with
petitioner LUDO and Antonio Bartolome. What is glittering, therefore, is that
the deceased also took on the added duty of being the overseer of the
petitioners. Nothing in law and in the facts of the case at bar excludes one
from the other.

We cannot sustain the
pronouncements of the Boards a quo to
the effect that as early as 1975, the subject landholding ceased to be
agricultural in nature when Conrado F. Estrella, Minister of Agrarian Reform
issued a conversion permit[26]
allowing said conversion from agricultural to residential/commercial pursuant
to the zoning regulation passed by the legislative authority of Iligan City.
The land having ceased to be agricultural as far back as 1975, there can be no
current legitimate tenant to speak of.

To begin with, the declaration by the Boards a
quo to the effect that as early as 1975, the subject landholding ceased to
be agricultural in nature when the DAR issued a conversion permit is extremely
misleading because the conversion permit was not issued in 1975, but was
actually signed by then Secretary Estrella only on 30 March 1978. What was in
reality referred to by the Boards was only City Ordinance No. 1313, otherwise known as the Zoning
Regulation of Iligan City. Pursuant thereto, the subject landholding of the
case was reclassified from agricultural to residential/commercial as such fell
within the Commercial-Residential Zone of the City of Iligan. In 1975, the
subject landholding was just merely reclassified and not converted.

Reclassification is very much different from
conversion. The latter is the act of changing the current use of a piece of
agricultural land into some other use as approved by the DAR.[27] Reclassification, in
contrast, is the act of specifying how agricultural lands shall be utilized for
non-agricultural uses such as residential, industrial or commercial, as
embodied in the land use plan, subject to the requirements and procedure for
land use conversion.[28]
Accordingly, a mere reclassification of agricultural land does not
automatically allow a landowner to change its use and thus cause the ejectment
of the tenants. Parties can still continue with their tenurial relationship
even after such reclassification. He has to undergo the process of conversion
before he is permitted to use the agricultural land for other purposes.[29]

Conspicuously,
the Court of Appeals disparaged the aforecited finding when it declared that:

. . . While it is a fact that as
early as 1975, the area where the subject landholding is located was declared
by City Ordinance 1313 (Zoning Regulation of Iligan City) to be within a
commercial-residential zone…, it is indubitable that the subject six-hectare
land was actually devoted to agricultural activity.

Under R.A. No. 6657, land devoted
to agricultural activity is agricultural land (Sec. 3 [b]). The same law
defines agricultural activity as “the cultivation of the soil, planting of
crops, growing of fruit trees, raising of livestock, poultry or fish, including
the harvesting of such farm products, and other farm activities and practices
performed by a farmer in conjunction with such farming operations done by
persons whether natural or juridical” (Sec. 3 [c]).

Not only does the six-hectare
landholding go through the foregoing activities at one point in time or
another; respondents further admitted that the land was devoted and utilized
for the production and harvest of coconut products.

On the basis of the foregoing, it
is indubitable that the subject landholding is agricultural land.[30]

While we agree in the conclusion,
we do not fully subscribe to the aforequoted ratiocination. What we stated in
the case of Spouses Cayetano and Patricia Tiongson, et al. v. Court of
Appeals and Teodoro S. Mascaya[31]is especially fitting in the case at bar:

. . . The fact that a caretaker
plants rice or corn on a residential lot in the middle of a residential
subdivision in the heart of a metropolitan area cannot by any strained
interpretation of law convert it into agricultural land and subject it to the
agrarian reform program.

To set the record straight, a conversion permit was
indeed issued to the petitioners by the DAR on 30 March 1978 allowing
petitioner LUDO and accordingly co-petitioner CPC, being the developer, to
change the current use of the landholding subject of the case at bar.
Notwithstanding such, however, it is axiomatic, as plainly provided for by
Section 36 of Rep. Act No. 3844:

SEC. 36. Possession of
Landholding; Exceptions. – Notwithstanding any agreement as to the period or
future surrender, of the land, an agricultural lessee shall continue in the
enjoyment and possession of his landholding except when his dispossession has
been authorized by the Court in a judgment that is final and executory if after
due hearing it is shown that:

1. The landholding is
declared by the department head upon recommendation of the National Planning
Commission to be suited for residential, commercial, industrial or some other
urban purposes: Provided, That the agricultural lessee shall be entitled to
disturbance compensation equivalent to five times the average of the gross
harvests on his landholding during the last five preceding calendar years;

. . . .

From
the foregoing provision of law, it is clear that a tenant can be lawfully
ejected only if there is a court authorization in a judgment that is final and
executory and after a hearing where the reclassification/conversion of the
landholding was duly determined. If the court authorizes the ejectment, the
tenant who is dispossessed of his tenancy is entitled to disturbance
compensation. Put simply, court proceedings are indispensable where the
reclassification/conversion of a landholding is duly determined before
ejectment can be effected, which, in turn, paves the way for the payment of
disturbance compensation.

In the case at bar, though there appears to be no
court proceeding which took cognizance of the reclassification/application for
conversion of the subject landholding from agricultural to
residential/commercial, the permit issued by the DAR on 30 March 1978 was
never assailed and thus, attained finality. In the case of Bunye v. Aquino,[32] the Court allowed the payment
of disturbance compensation because there was an order of conversion issued by
the DAR of the landholding from agricultural to residential. The decree was
never questioned and thus became final. Consequently, the tenants were ejected
from the land and were thus awarded disturbance compensation. From the
preceding discussion, it stands to reason that deceased Vicente C. Barreto, who
used to be a tenant of petitioner LUDO at the time of the conversion of the
subject landholding, is entitled to disturbance compensation for his
dispossession.

Having declared that deceased Vicente C. Barreto,
who had been fittingly substituted by his legal heirs, is entitled to
disturbance compensation under the law, the next appropriate concern to be
addressed is if such entitlement has already prescribed by virtue of Section 38
of Rep. Act No. 3844:

SEC. 38. Statute of
Limitations. – An action to enforce any cause of action under this Code
shall be barred if not commenced within three years after such cause of action
accrued.

The Boards a quo and
the petitioners are of the view that prescription has already set in, thus, the
respondent heirs of Vicente C. Barreto cannot now claim for payment of
disturbance compensation. According to the decision of the DARAB, the deceased
Vicente C. Barreto’s cause of action arose in 1974 when the latter received
notice of the intended conversion of the subject landholding by petitioner
LUDO. When the deceased filed the instant complaint in 1991, thirteen years had
already passed, hence, beyond the three-year prescriptive period enunciated
above.

On this matter, the Court
agrees with the Court of Appeals, in its ruling, as contained in its Resolution
dated 26 January 2001, which denied the motion for reconsideration filed by
petitioners LUDO and CPC anchored on the issue of prescription. It held that:

. .
. It would appear however from the records that the respondents, through its
general manager terminated the services of the late petitioner Vicente Barreto
only on July 29, 1991. The instant complaint was filed also in the same
year before the Office of the Agrarian Adjudicator in IliganCity.[33]

In fine, the
Court cannot, in law and conscience, condone the eviction of the deceased Vicente
C. Barreto, absent the payment of disturbance compensation due him under the
law.

WHEREFORE, in view of the
foregoing, the instant petition is DENIED. The assailed Decision dated 24 November 2000, and the Resolution dated 26 January 2001, rendered by the Court of
Appeals in CA-G.R. SP No. 46025, are hereby AFFIRMED in toto. No costs.

SO ORDERED.

MINITA
V. CHICO-NAZARIO

Associate Justice

WE CONCUR:

REYNATO S. PUNO

Associate Justice

Chairman

MA.
ALICIA AUSTRIA-MARTINEZ

Associate Justice

ROMEO J. CALLEJO, SR.

Associate Justice

DANTE O. TINGA

Associate Justice

A T T
E S T A T I O N

I attest that the conclusions in the above Decision
were reached in consultation before the case was assigned to the writer of the
opinion of the Court’s Division.

REYNATO S. PUNO

Associate Justice

Chairman, Second Division

C E R
T I F I C A T I O N

Pursuant to Article VIII, Section 13 of the
Constitution, and the Division Chairman’s Attestation, it is hereby certified
that the conclusions in the above Decision were reached in consultation before
the case was assigned to the writer of the opinion of the Court’s Division.